Canadian Natural Resources brings U.S. deal; GreenField hits delay; High-yield bonds gain

By Cristal Cody

Prospect News, Nov. 11 - Canadian bond markets traded on volatile, low volume going into the early close on Thursday.

The bond markets will be closed in Canada on Friday for Remembrance Day.

"Pretty light," a trader said. "A lot of investors weren't around today."

No domestic primary action was seen on Thursday, but a Canadian issuer was in the U.S. high-grade market.

Canadian Natural Resources Ltd. sold $1 billion of notes in two tranches.

Corporate issuers mostly got their domestic funding out of the way by Wednesday or may come back in the upcoming week, though issuance depends on market tone, a source said Friday.

"If we get more days like Wednesday, then probably not," the source said. "In volatile periods, it's very hard to launch a deal. Investors are going to shy away."

On the high-yield side, an expected deal is "going to be delayed," but GreenField Ethanol Inc.'s offering "eventually" will come to market, a source said Friday.

The Ontario-based ethanol company finished a two-week roadshow on Nov. 2 for the offering of C$175 million of five-year senior second-lien notes (/B+/DBRS: B).

Canadian corporate bond spreads weakened on Wednesday and opened Thursday 1 basis point to 2 bps tighter.

"Spreads were generally closing 1 [bp] tighter," a source said. "The morning was more positive, but as the day progressed, we saw weakness in equities and we're closing the day flat to 1 [bp] better."

The Markit CDX Series 17 North American high-grade index ended unchanged at a spread of 130 bps.

Secondary activity mixed

No secondary market activity was seen late Friday in the new notes from Canadian Natural Resources, a trader said.

High-yield bonds rose slightly on the week. Bonds priced earlier in the week from Newalta Corp. and Ford Credit Canada Ltd. traded higher on Friday, while Cara Operations Ltd.'s notes held wrapped around the issue price, a trader said.

The three deals all came on Tuesday.

"They're all trading up after the break," the trader said.

Sherritt International Corp.'s notes due 2018 priced in late October also edged higher in the secondary market.

Canadian government bonds dropped on better economic data and after Italy wrapped a sale of €5 billion of one-year treasury bills at a yield of 6.087%, easing overseas debt fears.

Canada's 10-year note yield rose 3 bps to 2.13%. The 30-year bond yield also closed 3 bps higher to 2.75%.

"We don't seem to be driven too much by domestic events alone," a source said. "It continues to be international developments that really have pushed the Canadian market, which is a bit of a shame because today's figures were quite encouraging."

Statistics Canada on Thursday reported a stronger-than-expected trade balance with a surplus of C$1.2 billion in September after a deficit of C$487 million in August. Canada's merchandise exports grew 4.2% in September, while imports fell 0.3%.

The U.S. Labor Department also reported fewer jobless claims in the previous week.

Canada's bond market awaited further details late Thursday on upcoming new supply. Bond sources expect Canada to auction C$1.4 billion of bonds due December 2045 in the week ahead.

Primary sees more supply

In the U.S. market, Canadian Natural Resources priced $1 billion of senior notes Thursday, according to a term sheet.

The offering, which was conducted in two tranches, was priced through bookrunners J.P. Morgan Securities LLC, BNP Paribas Securities Corp. and RBC Capital Markets LLC.

The co-managers were BMO Capital Markets Corp., CIBC World Markets Corp., Citigroup Global Markets Inc., Bank of America Merrill Lynch, Scotia Capital (USA) Inc., Deutsche Bank Securities Inc., Mitsubishi UFJ Securities (USA) Inc., Barclays Capital Inc., DnB NOR Markets Inc., Mizuho Securities USA Inc. and SG Americas Securities LLC.

The deal included $500 million of three-year notes and $500 million of 10-year notes.

The three-year notes were priced at a spread of Treasuries plus 110 bps. The notes, which were priced at 99.901 to yield 1.484%, feature a make-whole call at Treasuries plus 20 bps.

The 10-year notes were priced at a spread of Treasuries plus 145 bps. The notes feature a make-whole call at Treasuries plus 25 bps. The notes were priced at 99.606 to yield 3.497%.

Proceeds from the sale will be used to repay borrowings under the company's credit facilities.

Based in Calgary, Alta., Canadian Natural is a natural gas and crude oil exploration, production, acquisition and marketing company.

Newalta rises

In Canada's secondary market, Newalta's 7¾% senior debentures due Nov. 14, 2019 traded up to 100.5 bid, 101 offered, a trader said Friday.

The company sold C$125 million of the series 2 debentures (B1/DBRS: BB) at par on Tuesday.

Newalta is a Calgary, Alta.-based industrial waste management and environmental services company.

Ford Credit Canada

The new 4.2% two-year senior notes that Ford Credit Canada (Ba1/BB+/DBRS: BB) sold on Tuesday also traded higher at 100.25 bid, a trader said.

The 4.2% notes due Nov. 14, 2013 priced at 99.949 to yield 4.227% in a C$450 million offering.

The company is a financing arm of the Ford Motor Co.

Cara holds

Cara Operations' 9 1/8% debt subscription receipts due Dec. 1, 2015 traded Friday at 99 bid, par offered, a source said.

Cara (/BB-/DBRS: B) sold C$76 million of the receipts at 99 to yield 7.42% on Tuesday to help fund its takeover of Prime Restaurants Inc.

The company sold the receipts after a protracted consent solicitation for an amendment for its existing 9 1/8% senior second-lien guaranteed notes due Dec. 1, 2015. The subscription receipts will be fungible with the original 9 1/8% notes once the company's acquisition closes in January.

Vaughan, Ont.-based Cara is Canada's largest full-service restaurant operator with brands that include Swiss Chalet Rotisserie & Grill, Harvey's and Montana's Cookhouse.

Sherritt edges up

Sherritt International's 8% notes due Nov. 2, 2018 traded up to 100.375 bid, 101 offered on Friday, according to a trader.

The company sold C$400 million of the senior notes (DBRS: BB) at par to yield 8% on Oct. 28.

Toronto-based Sherritt International produces coal and mines and refines nickel.

Sheri Kasprzak contributed to this review

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